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Director General of the CBI Digby Jones
"We are going to be revising our forecast"
 real 56k

Thursday, 12 April, 2001, 07:58 GMT 08:58 UK
Business leaders warn of slowdown
A worker with UK flag behind
The UK's main business organisations have warned growth will slow this year because of the foot-and-mouth outbreak and the US economic slowdown.

The Confederation of British Industry (CBI) has cut its growth forecast from 2.5% to 2% for 2001, and predicted that the jobless total will rise by an extra 50,000.

The Institute of Directors (IoD) also raised concerns over the slowing economy when it released a survey showing a continuing slide in business optimism.

The bleak prognosis came after announcements of thousands of possible job losses at ship builder Cammell Laird and Marconi and as doubts remain over the future of 3,200 jobs at Motorola's mobile phone factory in Bathgate, West Lothian.

Confidence falling

"This is going to be a worrying Easter for many people in business. It is clear the foot and mouth epidemic and the slowdown in America will be strongly felt in many quarters," said Digby Jones, director general of the CBI.

He went on to say it was too soon to talk of recession.

While the US slowdown was likely to have the greater effect in the long-term, the CBI said the most pressing problem was foot-and-mouth, which accounted for 0.3% of the reduction in the growth rate forecast.

In its report, the IoD said economic activity peaked in the first quarter of 2000, and has been decelerating over the last four quarters.

Their index of business optimism - the balance of business leaders who were more optimistic, rather than less - fell to 28% in the first quarter of this year from 35% in the final quarter of last year.

"In addition to the deteriorating international environment, falling equity prices and the cumulative knock-on effects of the foot and mouth epidemic are increasingly damaging economic confidence and activity," said Ruth Lea, head of the policy unit at the IoD.

She warned there was a very real chance of a serious economic downturn.

Manufacturers more positive

But latest figures from the British Chambers of Commerce (BCC) show that despite the global slowdown, confidence in manufacturing has risen to its highest level for a year.

In a survey of more than 7,000 UK firms, it showed that although manufacturers have been reporting slower growth in domestic sales this year, more were optimistic about improving turnover over the next 12 months.

"Underlying strength in the domestic economy remains," said David Sears, deputy director general at the BCC.

"Manufacturers [are] confident of avoiding the worst of the impact of the global slowdown," he added.

British economy

Britain last week cut interest rates a quarter of a point to 5.5% to help cushion the economy from the US slowdown, but they are still the highest rates among the Group of Seven (G7) top industrialised nations.

Hopes that the European Central Bank would add its weight to kick-starting the flagging global economy received a setback on Wednesday when it left interest rates on hold in the euro-zone.

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See also:

11 Apr 01 | Business
Cammell Laird calls in receivers
11 Apr 01 | Scotland
Motorola jobs effort stepped up
11 Apr 01 | Business
Slowdown hits developing countries
05 Apr 01 | Business
Bank of England cuts rates to 5.5%
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